Tapestry has reported sales growth for the fourth quarter, mainly thanks to the double-digit uplift at Coach.
The company’s revenue for the quarter ended June 28 increased 8 per cent to $1.7 billion.
While the growth comes off the back of a weaker result from the prior year, producing an 8.3 per cent uplift during the current soft environment is no mean feat, commented GlobalData MD Neil Saunders.
“Indeed, it marks Tapestry out as one of the clear winners in the luxury and premium arena,” he added.
All the growth was driven by Coach where sales soared 14 per cent. The analyst attributed the continued solid performance to the fact that Coach is not in the super-premium part of the market, where prices have risen unreasonably.
The pickup of new customers was augmented by the growing popularity of the Coach brand among younger Gen Z and Millennial consumers, he continued, adding that strong social media activity and marketing were also helpful.
“However, the main thrust of the growth has been driven by a shift in the Coach offer which, over time, has become more contemporary and on trend. Along with improvements to style and design, it encourages trading up to still reasonable, but higher, price points,” he elaborated.
At Kate Spade, sales plunged 13 per cent, which Saunders blamed on the brand’s “confused” assortment.
“There are some nice individual pieces, but the whole assortment is not all that compelling, and it lacks a coherent narrative to pull it together. This makes it a nice-to-have, rather than a must-have – which in the current environment is a sales killer,” he said.
Tapestry has made changes at the brand, including appointing Eva Erdmann as CEO and brand president, but it will take time for her full influence to be felt, the analyst stated.
Stuart Weitzman, which has now been sold to Caleres, saw sales fall 10 per cent. Saunders believed the sale was the right move as it would allow Tapestry to focus more on the remaining two labels in the year ahead.
The strong performance on the top line, however, did not replicate on the bottom line, where the group posted a net loss of $517.1 million.
According to Saunders, this was mainly driven by the loss on the extinguishment of debt taken on to fund the failed acquisition of Capri and a write-down on the brand value of Kate Spade.
“The former is somewhat outside of Tapestry’s control as the FTC kiboshed the deal. The latter is down to Tapestry’s inability to turn the brand around, so responsibility lies on the shoulders of management,” he added.
For the full year, Tapestry’s revenue rose 5 per cent to $7 billion, while net income dropped from $816 million to $183 million.
The company expects revenue of approximately $7.2 billion for this fiscal year, representing low-single-digit growth. It also expects tariffs to negatively impact its operating margin.
